CAIT to PM Modi: E-commerce firms monopolising market by violating FDI policy; poor action hurting MSMEs

The Modi government had last year asked the e-commerce companies with FDI to maintain a report to confirm compliance.

Ease of Doing Business for MSMEs: Big e-commerce companies having deep pockets are leaving no stone unturned in monopolizing the e-commerce business and retail trade of India with their malpractices and violating FDI policy, traders’ body Confederation of All India Traders (CAIT) said in a letter to Prime Minister Narendra Modi on Sunday. CAIT, which has been campaigning against Amazon and Flipkart for years now alleging unethical business practices by them, said that the absence of concrete action against e-commerce companies has led to a roadblock for small businesses to run their operations online.

The confederation called it “most unfortunate” that “various government authorities have failed to protect the sanctity of the policy and law of the government,” according to the letter. CAIT has been long alleging that the online marketplaces have been undertaking “predatory pricing, deep discounting, loss funding and exclusivity of various products, which are not allowed under the FDI policy,” it had said in a statement last year. However, both Amazon and Flipkart have repeatedly claimed complete compliance with the FDI laws.

The Modi government had last year asked the e-commerce companies with FDI to maintain a report to confirm compliance. “Against Sl. No. 15.2.3, for entry (p), the following entry shall be substituted, namely;- (p) e-commerce marketplace entity with FDI shall have to obtain and maintain a report of statutory auditor by 30th of September every year for the preceding financial year confirming compliance of the e-commerce guidelines,” according to a notification by the Ministry of Finance on December 5, 2019, announcing the amendments made in the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

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The draft Consumer Protection (e-commerce) Rules, 2019, by the Department of Consumer Affairs in November last year had noted that e-commerce companies should not directly or indirectly influence the price of products, adopting methods that may influence ‘transactional’ decision of customers, false reviews,  etc and that they should display contract terms between them and their sellers with respect to returns, refunds, exchange, delivery, payments, grievance redressal, etc.

“While urging for a strong action against them, it is requested that an e-commerce policy should be announced immediately with an explicit provision of an empowered Regulatory Authority to regulate and monitor the e-commerce business in India,” the letter added. CAIT also sought the issuance of a fresh Press Note and removal of anomalies and disparities of Press Note No.2 of FDI policy.

Last week, CAIT’s National President B C Bhartia and Secretary General Praveen Khandelwal had said in a statement that no permission for FDI could have been granted for the inventory-based model of e-commerce being pursued by both (Amazon and Flipkart) of these companies by the way of indirectly controlling the inventories of most prominent sellers on their e-commerce marketplace platform. The body wrote to DPIIT Secretary Guruprasad Mohapatra claiming violation of the rules under the Foreign Exchange Management Act, 1999.

The violations noted by CAIT in the statement included Amazon controlling Future Retail Limited (“FRL”), a multi-brand retailer. Amazon controlling More Retail Limited (“MRL”), a multi-brand retailer, Walmart (Flipkart) controlling Aditya Birla Fashion & Retail Limited, a multi-brand retail company, Flipkart directly/indirectly controlling the sellers and/or their inventory on their e-commerce marketplace platform.” It added that Amazon is directly/indirectly controlling the sellers and/or their inventory on their e-commerce marketplace platform, Amazon Retail Pantry selling multi-brand food products on its e-commerce marketplace platform and that Amazon has “reportedly invested in excess of Rs. 35,000 crores for capturing the e-commerce market and in the process has caused a death knell for crores of small merchants in India.”

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